You deposit $12,000 annually into a life insurance fund for the next 40 years, after which you plan to retire. Ch 15
a. What are the considerations when you are looking for a certain life insurance fund?
b. If the deposit is made at the beginning of the year and earn an interest of 7 percent, what will be the amount after the end of year 40?
c. You wish to receive annuities for the next 20 years (year 41 to 60). What is the annual payment you expect to receive at the beginning of the year if the interest is 7 percent in year 41 to 60?
d. Repeat step b and c with 8 percent interest and 6 percent interest and show the difference in terms of annual payment.
e. Would you personally invest into this kind of insurance fund? If not, what kind of investment are you interested in? Please explain why.
You deposit $12,000 annually into a life insurance fund for the next 40 years, after which you plan to retire. Ch 15
a. What are the considerations when you are looking for a certain life insurance fund?
b. If the deposit is made at the beginning of the year and earn an interest of 7 percent, what will be the amount after the end of year 40?
c. You wish to receive annuities for the next 20 years (year 41 to 60). What is the annual payment you expect to receive at the beginning of the year if the interest is 7 percent in year 41 to 60?
d. Repeat step b and c with 8 percent interest and 6 percent interest and show the difference in terms of annual payment.
e. Would you personally invest into this kind of insurance fund? If not, what kind of investment are you interested in? Please explain why.
Related questions
| a. | If the deposits are made at the beginning of the year and earn an interest rate of 8 percent, what will be the amount in the retirement fund at the end of year 10? |
| b. | Instead of a lump sum, you wish to receive annuities for the next 20 years (years 11 through 30). What is the constant annual payment you expect to receive at the beginning of each year if you assume an interest rate of 8 percent during the distribution period? |
| c. | Repeat parts (a) and (b) above assuming earning rates of 7 percent and 9 percent during the deposit period and earning rates of 7 percent and 9 percent during the distribution period. |
| Deposit Period | Value at 10 Years | Distribution Period | Annual payment |
| 7 percent | $ | 7 percent | $ |
| 9 percent | $ | ||
| 9 percent | $ | 7 percent | $ |
| 9 percent | $ |
